SomethingElse, I used the exact same method to remove my gear teeth, including the use of a cheap Harbor Freight grinder. I carefully masked the bearings and just let the shaft spin from the disk grinding against it. I have a lathe, but those gear teeth are *hard*. Grinding was the right way to do it.
Depending on if the sensor is somewhere around the actual differential itself or on the pinion shaft, it'd be possible to remove the ring gear, or grind off the teeth back in the transfer housing. Either the front wheels would turn the differential, or the transfer gears would turn the pinion to provide a speedo signal. ...a little late for you at this point, though.
I'd sure love to have a Lincoln-locker for a few days. : ) Not gonna happen though. Not yet, anyway.
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